Brief Context
The Union Cabinet, chaired by the Prime Minister has approved an incentive scheme to promote low-value BHIM-UPI transactions (Person-to-Merchant P2M) for the financial year 2024-25.
Source Content
Syllabus: GS3/ Economy
In News
- The Union Cabinet, chaired by the Prime Minister has approved an incentive scheme to promote low-value BHIM-UPI transactions (Person-to-Merchant – P2M) for the financial year 2024-25.
Key Highlights
- Incentive Structure:
- 0.15% per transaction incentive for small merchant transactions up to ₹2,000.
- Incentive distributed among Acquiring Bank, Issuer Bank, Payment Service Provider Bank, and App Providers.
- Objectives:
- Promote the indigenous BHIM-UPI platform.
- Strengthen the indigenous BHIM-UPI platform and boost transaction volumes to ₹20,000 crore in FY 2024-25.
- Promote feature phone-based UPI 123PAY & offline UPI Lite/LiteX for financial inclusion.
- Encourage UPI adoption in Tier 3 to Tier 6 cities, especially rural and remote areas.
- Key Benefits:
- Zero cost UPI services for small merchants.
- Continues the Merchant Discount Rate (MDR) exemption introduced in 2020 for UPI transactions.
- MDR is the fee paid by merchants when they accept digital payments.
What is UPI?
- The Unified Payments Interface (UPI) is a real-time payment system developed by the National Payments Corporation of India (NPCI). It allows users to link multiple bank accounts into a single mobile application, enabling instant money transfers.
- BHIM-UPI is the government-backed UPI application, launched in 2016, designed to promote seamless, fast, and secure digital payments.
- The NPCI International Payments Limited (NIPL), a subsidiary of NPCI, is working to expand UPI & RuPay globally. UPI is now accepted in Singapore, UAE, France, Sri Lanka, Nepal, and other countries.
Source: BS